Carrier’s Liability on Road Transport

The carrier liability refers to the legal responsibilities that carriers have for the loss, damage, or delay of goods during transit. In this context, for claims to be validated, it must be shown that the goods were initially in good condition, were damaged or lost during transit, and the damage has been accurately assessed and valued.

If a claim is validated, the carrier is deemed liable and legally required to cover the claim. However, certain defenses may absolve the carrier from liability, such as acts of God, the inherent nature of the goods, or inadequate packaging by the shipper.

Carrier's Liability on Road Transport

Introduction: What is Carrier's Liability?

Carrier’s liability in road transport refers to the legal responsibilities that carriers have regarding the loss, damage, or delay of goods during transit.Transport contracts are all about clearly defining the parties’ obligations and liabilities, who does what, and who is liable for what.

While transport contracts establish the framework for these responsibilities, insurance policies provide essential financial protection against associated risks. Together, legal frameworks and insurance policies enable carriers to manage risks effectively, ensuring they can meet their obligations without incurring debilitating financial losses.

Both the legal frameworks and insurance policies work together to ensure that carriers can manage risks effectively and fulfill their obligations without facing debilitating financial losses.

Legal Framework for Carrier Liability in Road Transport

The CMR Convention (Convention on the Contract for the International Carriage of Goods by Road) is the primary international agreement governing the carriage of goods by road.

Its application is only effective when expressly mentioned by the parties in their contractual agreement. The CMR standardizes conditions of carriage, carrier liability, and procedures for claims and disputes across member countries.

Various regional agreements complement the CMR Convention. For example, the Agreement on International Goods Transport by Road (AIGTR) in CIS countries aligns with CMR principles but addresses specific regional needs.

In the European Union, several regulations influence carrier liability. The EU Road Transport Regulation 561/2006 establishes rules on driving times, breaks, and rest periods for drivers, indirectly influencing liability issues by promoting safety. Additionally, Regulation (EU) No 165/2014 on tachographs in road transport mandates the use of digital tachographs to monitor and ensure compliance with these rules.

The ADR (European Agreement concerning the International Carriage of Dangerous Goods by Road) specifically regulates the transport of hazardous materials, imposing stringent requirements on packaging, labeling, and handling. This agreement significantly impacts carrier liability by ensuring the safe transport of dangerous goods.

National regulations also play a significant role in governing road transport liability. These laws often incorporate international standards while addressing specific provisions for domestic road transport. For instance, the UK’s Goods Vehicles (Licensing of Operators) Act 1995 provides a framework for the licensing and regulation of goods vehicle operators, ensuring they meet high standards of safety and compliance.

The TIR Convention (Transports Internationaux Routiers) facilitates international transit by using a standardized customs document and providing a guarantee system, thereby reducing potential liabilities for carriers during cross-border operations.

Lastly, the Agreement on the International Carriage of Perishable Foodstuffs (ATP) sets standards for the transportation of perishable goods, ensuring that carriers use appropriate equipment and methods to maintain the quality and safety of these goods during transit.

Carrier's Liability Factors in Common Road Transport Claims

As previously mentioned, the carrier’s liability can be specified in various documents, including insurance policies, transportation contracts, and national and international legal regulations.

According to Article 17 of the CMR Convention, the carrier is liable for the total or partial loss of goods and for any damage occurring between the time of taking over the goods and the time of delivery. That is why the carrier’s responsibility includes verifying the integrity of the load and checking its details against the consignment note.

Based on different legal and contractual frameworks governing the transportation of goods, carrier’s liability can be categorized into three main types: strict liability, negligence-based liability, and limited liability. Under strict liability, the carrier is responsible for any loss or damage to the goods unless they can demonstrate that the cause was an excepted peril, such as an act of God or war. Negligence-based liability, on the other hand, requires the claimant to prove that the loss or damage occurred due to the carrier’s negligence. Lastly, limited liability sets a cap on the amount the carrier is liable for, based on a predetermined amount per unit of goods, as specified by law or contract.

Common causes of claims in road transportation where carriers are liable:

Cause Description
Accidents and collisions Traffic accidents due to driver error, weather conditions, or other vehicles can cause significant damage or loss to the cargo. Carriers may be held liable for these damages if it is proven that the accident was due to negligence or failure to adhere to safety standards.
Theft and hijacking Cargo theft during transit is a prevalent issue, especially in regions with high crime rates or inadequate security measures. Carriers are responsible for ensuring adequate security protocols to mitigate such risks and may be liable for losses resulting from theft. 
Improper handling and loading Mishandling or improper loading of goods can result in damage. This includes inadequate securing of cargo or incorrect weight distribution. Carriers must follow proper loading procedures to prevent such incidents and avoid liability.
Environmental factors Exposure to extreme weather conditions such as rain, snow, or high temperatures can damage sensitive or perishable goods.
Mechanical failures Vehicle breakdowns or mechanical failures during transit can lead to delays and potential spoilage or damage to the cargo. Regular maintenance and inspections are essential to minimize the risk of mechanical issues and the carrier’s liability.
Delays Delays caused by traffic congestion, border controls, or regulatory inspections can lead to financial losses, especially for time-sensitive shipments.
Inadequate packaging Poor packaging provided by the shipper can lead to damage during normal transit conditions. This is often a contentious area for liability determination.
Driver negligence Inadequate training, fatigue, or violation of transport regulations by drivers can result in accidents or improper handling of cargo. Carriers are responsible for ensuring their drivers are properly trained and comply with all regulations to avoid liability.

What Are the Common Exemptions from Carrier's Liability?

Carriers and forwarders are typically only liable for demonstrable errors or negligence during transportation. 

Exemptions from liability are often detailed in transport contracts, which generally state that the carrier is not liable for certain events. These clauses may also require the contracting party to indemnify the carrier against claims by third parties.

Common exemptions include damage or loss resulting from:

Errors by shipperMistakes made during preparation, such as inadequate packaging or improper labeling.
Force majeureUnforeseeable events such as extreme weather conditions.
Public authorityActions by public authorities, such as trade embargoes or quarantine.
Nature of goodsThe goods’ inherent nature, such as perishables that are subject to deterioration.
Inherent defects of the goodsDamage due to the inherent defects or natural properties of the goods.
Packing defectsDamage resulting from inadequate or defective packaging.
Acts of the consignorDamage caused by actions or omissions of the consignor.

According to the CMR Convention, the carrier is not liable if the loss or damage arises from circumstances they could not avoid and the consequences of which they were unable to prevent. However, if the carrier acts with gross negligence or willful misconduct, they may be responsible for the full value of the goods, regardless of the contractual limits.

These exemptions are often invoked to limit the carrier’s liability, emphasizing the importance of careful contract review and adequate insurance coverage for shippers. Understanding these exemptions can help shippers better prepare for potential risks and ensure they have the necessary safeguards in place.

Managing Claims under Carrier's Liability: 12 Key Questions

As an insurer or reinsurer managing a claim against a transport provider, it is necessary to demonstrate that the cargo was picked up in good condition and delivered damaged, and substantiate the specific financial loss incurred. This task is complicated by the transport sector’s laws, which often allow carriers to limit their liability.

Phase 1: First Notice of Loss (FNOL)

1. Who files a claim against the carrier?

The specific circumstances of the incident and the terms and conditions of the transport contract will determine who has the legal right to file a claim and the procedures that must be followed.

Typically, the claim process is initiated by the cargo owner (in the case of a cargo insurance policy), the consignee, or the cargo insurer in the event of subrogation. In some cases, the carrier may also file an initial claim to notify the incident.

Detailed information about the incident, such as date, time, location, and circumstances, must be recorded and reported immediately to start the formal claim process.

2. What documents are needed to demonstrate carrier liability in road transport cases of cargo damage or loss?

To file an effective claim, several key documents are required:

  • Bill of lading or consignment note: Proof of the contract of carriage.
  • Protest/claim letter: A formal document detailing the nature of the claim and the compensation sought.
  • Police or incident report: If applicable, detailing the events related to the incident.
  • Commercial invoice: Evidence of the value of the goods.
  • Packing list: Details of the goods and their packaging.
  • Survey report: Independent assessment of the damage, if applicable.

3. What are the deadlines for filing claims and pursuing court proceedings?

The deadlines for filing claims and initiating legal proceedings vary depending on the applicable legislation and contractual terms. Generally, the timelines include:

Immediate Notification

Usually required within the first 24-48 hours post-incident. This ensures that the carrier is promptly informed about the incident, allowing for timely investigations and mitigations to prevent further losses.

For example, the CMR Convention mandates notice of apparent loss or damage at the time of delivery and hidden loss or damage within seven days.

Shippers must notify the carrier of any loss or damage within a specific timeframe to preserve their right to claim.

Formal Claim Submission

Typically ranges from 3 to 12 months from the date of the incident, depending on the type of cargo and jurisdiction. The claimant must submit a formal claim to the carrier, providing all necessary documentation and details regarding the loss or damage. This period allows the claimant to gather and organize all relevant information to substantiate the claim.

Initiating Legal Proceedings

The deadlines for initiating legal actions can range from 1 to 3 years. If the claim is not resolved amicably through negotiations or other dispute resolution mechanisms, the claimant may need to pursue legal action. The exact timeline for initiating court proceedings depends on the jurisdiction and specific contractual terms.

Prescription under the CMR Convention

The CMR Convention provides for three types of limitation periods, which shall run from:

  • In the case of partial loss, damage, or delay, from the day on which the goods were delivered.
  • In the case of total loss, from the 30th day after the expiry of the term, or the 60th day from receipt of the goods.
  • In all other cases, from the third month after the date of conclusion of the transport contract.

A written complaint suspends the limitation period until the day on which the carrier rejects it in writing.

Phase 2: Loss Assessment
Loss assessment refers to the process of determining the nature, extent, and economic value of the loss or damage to the cargo.

4. What methodologies are utilized to evaluate the nature and extent of cargo damage?

Loss assessment involves evaluating the value of damaged or lost goods by reviewing the commercial invoice, inspection reports, and contractual terms, considering the impact on the functionality and value of the merchandise.

This may involve:

  • Analyzing contractual terms and applicable legal frameworks: Understanding the carrier’s liability limits and obligations.
  • Verifying the extent of carrier’s liability: Based on available documentation and evidence.
  • Reviewing documentation: Examining all submitted documents for accuracy and completeness.
  • Interviews: Conducting interviews with relevant parties, such as the driver, warehouse staff, and consignor.
  • Expert analysis: Engaging experts to analyze the cause of loss or damage, especially in complex cases.

These methodologies ensure a thorough assessment of the loss, helping to determine the rightful compensation and support the resolution of the claim under the carrier’s liability.

5. What measures have been taken to minimize the losses?

Loss mitigation is interconnected with the carrier’s liability playing a significant role in determining the final extent of financial responsibility the carrier has to bear. By reducing the impact of losses, effective mitigation strategies can lower the compensation owed by the carrier and fulfill legal obligations to minimize damages.

When loss mitigation measures are effectively implemented, the extent of the damage or loss is reduced. This, in turn, lowers the potential financial liability of the carrier. For example, if damaged goods are promptly salvaged and sold, the loss is less severe, and the compensation the carrier must pay is consequently lower.

In many legal frameworks, including those governing carrier liability, there is an obligation on the part of the claimant (shipper) to take reasonable steps to mitigate their losses. Failure to do so can limit the compensation they are entitled to receive from the carrier. This means the carrier’s liability may be reduced if it can be shown that the claimant did not adequately mitigate the loss.

Phase 3: Liability Assessment

Determining if the responsibility lies with the carrier, the freight forwarder, or third parties is crucial.

6. How is the carrier’s liability limit applied and calculated according to the contract and applicable legislation?

To address how the carrier’s liability limit is applied and calculated according to the contract and applicable legislation, you can respond as follows:

The application and calculation of the carrier’s liability limit depend on the specific terms of the contract and the relevant laws governing transportation. Generally, this process involves several steps. First, review the contractual terms to identify any clauses that specify the carrier’s liability limits. These terms often outline the maximum amount the carrier is liable for in the event of loss or damage. Next, determine the relevant laws and regulations that govern carrier liability, which can vary based on the mode of transportation (e.g., road, rail, air, sea) and the jurisdiction. Common regulatory frameworks include the Hague-Visby Rules for sea transport, the Warsaw Convention for air transport, and the CMR Convention for road transport.

The calculation method for liability limits can be based on different criteria. Some contracts and regulations set liability limits based on the weight or number of units, where liability might be limited to a certain amount per kilogram of the goods lost or damaged. If the shipper has declared a value for the goods, the carrier’s liability may be based on this declared value, up to a specified maximum limit. In some cases, there might be a fixed monetary limit per shipment or package.

In applying these limits, first, assess the actual value of the goods lost or damaged. Then, compare this calculated value with the limits specified in the contract and applicable legislation. The carrier’s liability will be the lesser of these two amounts. Additionally, consider any exceptions or exclusions that might apply, as some contracts and laws may exclude liability for certain types of damage or under specific circumstances (e.g., acts of God, war, or inherent vice of the goods).

7. How to determine if the loss or damage occurred during the carrier’s period of responsibility?

To determine if the loss or damage occurred during the carrier’s period of responsibility, review the transportation timeline and any transfer points. Check the bill of lading and other shipping documents to confirm when the carrier took possession and when the goods were delivered. Examine logs, tracking data, and any incident reports during the transport period.

8. Are there any documented instances of deviation from the agreed route or handling instructions that might affect liability?

Yes, instances of deviation from the agreed route or handling instructions can affect liability. These deviations should be documented in tracking records, GPS data, and communication logs between the carrier and other parties.

9. How do liability caps apply if multiple carriers are involved in the transport chain?

When multiple carriers are involved, liability caps are typically apportioned based on the segment of the journey each carrier handled. Each carrier’s liability will be limited to the portion of the loss or damage that occurred while the goods were under their control, as defined by the contractual terms and relevant legislation.

10. How does the “Himalaya Clause” extend liability protections to third parties?

The “Himalaya Clause” extends liability protections to third parties, such as subcontractors and agents, by incorporating them into the carrier’s liability limitations. This clause ensures that these third parties receive the same protections as the primary carrier, reducing their exposure to claims beyond the specified limits.

Phase 4: Dispute Resolution

11. What are the specific procedures for notifying the carrier of a potential liability claim within the required time frames?

Notify the carrier promptly as specified in the contract and applicable legislation. This often involves sending a formal notice of claim, detailing the nature and extent of the loss or damage within a specified period, usually within days or weeks of delivery.

 12. How is the settlement amount negotiated between the carrier and the claimant?

The settlement amount is negotiated through direct communication between the carrier, the claimant, and often insurance adjusters. Both parties present their evidence and documentation to support their positions.

13. What is the role of mediation in dispute resolution?

Mediation involves engaging a neutral third party to facilitate negotiations between the claimant and the carrier, aiming to reach a mutually acceptable solution.

14. What factors influence the average settlement amount for a freight transportation claim?

The average settlement amount varies based on the nature of the damage, the value of the merchandise, and the terms of the transport contract.

15. How is compensation for loss calculated according to the CMR Convention?

Compensation for loss is calculated based on the value of the goods at the place and time they were accepted for carriage. Article 23 of the CMR Convention typically limits the carrier’s liability to 8.33 SDR per kilogram of gross weight.

Article 24 allows for a higher declaration of value in the consignment note. “The sender may declare a value for the goods exceeding the limit indicated in paragraph 3 of Article 23, and in that case, the declared sum shall replace that limit.”

This flexibility can lead to full carrier liability based on the declared value of the goods, offering shippers the option to ensure a higher potential compensation in case of loss or damage, in exchange for an additional charge and an explicit declaration in the transport contract.

Phase 5: Legal Actions
Once the cargo insurer completes the assessment, several legal actions can be initiated, depending on the findings of the assessment and the circumstances of the case.

16. What procedures should be followed to initiate a subrogation claim against carriers responsible for cargo damage or loss?

To initiate a subrogation claim against carriers responsible for cargo damage or loss, the insurer, having compensated the insured, steps into their shoes to recover the loss from responsible third parties. This process is known as subrogation.

If the loss or damage is due to the carrier’s negligence (shipping company, trucking company, etc.), the insurer can file a claim or lawsuit against the carrier. This involves collecting and documenting evidence of negligence and damage, reviewing the transportation contract to identify obligations and liability limits, and acting swiftly within legal timeframes.

If other third parties, such as warehousing companies or manufacturers, are responsible, the insurer follows a similar procedure: gathering evidence, reviewing contracts, and pursuing legal claims to recover the amount paid to the insured.

17. How does the choice of jurisdiction affect freight claim litigation?

The choice of jurisdiction can affect the applicable laws, the complexity of the legal process, and the potential for favorable outcomes, making it an important strategic decision in litigation.

At Marlin Blue, we provide legal services for cargo insurers, covering the intricacies of managing claims and resolving disputes under carrier’s liability on road transport. Contact us today to fortify your understanding and capabilities in managing carrier liability claims.

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